Growth of businesses.

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Why might a business want to grow?

  • Their existing products may be in the later stages of their life cycles.
  • The business may lack sufficient knowledge or resources to develop organically.
  • The speed of growth is a high priority for the company.

How might a business grow?

  • Mergers
  • Take-overs
  • Developing & launching new products
  • Marketing

Limitations of take-overs.

  • Issues of changes in management.
  • Resistance from employees.
  • High costs.
  • Conflicting management styles, structures or cultures.
  • Unhappy customers or suppliers.

Joint venture: A separate business identity created by two or more companies, it involves shared ownership, risks, and returns. In some cases, businesses may join together short-term for a project.

Lateral merger: The purchase of a firm who is in a related field. I.e. Confectionary company may purchase a chewing gum company (Mars merged with Wrigley).

Conglomerate merger: The merger of two firms who have no common interest.

Demerger: Happens where one firm separates into two or more companies or sells a part of their business. I.e Fosters, Talk-Talk, Cadbury. 

Partial demerger: The parent company still holds a stake in the demerged business.

Reasons for a demerger:

  • To focus on core business to ease costs and improve profit margins. 
  • To reduce the risk of diseconomies of scale (Business grows too much to withstand the increase of costs per unit)
  • To raise money from sales of other holdings to give back to shareholders.
  • To have a strategy to defend the company from competition authorities who

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